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OBJECTIVE QUESTIONS: NEGOTIABLE INSTRUMENTS ACT,1881

BY VIJAYALEKSHMI OMANA - DECEMBER 20, 2009

1. Who are the parties in a bill of exchange?

A: Drawer, Drawee, Payee[Sec.7]
2. ________is an instrument in writing containing an unconditional undertaking signed by the maker to
pay a certain sum of money only to, or to the order of a certain person, or to the bearer.
A: Promissory Note[Sec.4]
3. ________is an instrument in writing containing an unconditional order, signed by the maker, directing
a certain person to pay a certain sum of money only to, or to the order of a certain person or to the
bearer.
A: Bill of Exchange[Sec.5]
4.________is a person entitled in his own name to the possession of a promissory note, bill of exchange
or cheque and to receive or recover the amount due thereon from the parties.
A: Holder[Sec.8]
5. _______is generally a person who for consideration became possessor of a promissory note, bill of
exchange or cheque.
A: Holder in due course[Sec.9]
6. Negotiable Instrument is defined in _________.
A: Sec.13
7. What is the process by which a negotiable instrument is transferred to any person so as to constitute
such person the holder called?
A: Negotiation[Sec.14]
8. Liability of drawer to compensate the holder in case of dishonor is primarily provided under_______.
A: Sec 30
9. A negotiable instrument made, drawn, accepted, endorsed or transferred without consideration, or
for a consideration which fails, creates _________ of payment between the parties to the transaction.
A: No obligation[Sec.43]
10. __________is one mode by which the maker of a negotiable instrument discharges himself from
liability.
A: Cancellation.; Release and Payment are other modes[Sec. 82]

11. Material alteration on a negotiable instrument renders it void.___________is an exception.

A: Common intention[Sec.87]
12. Penalties, Cognizance, Jurisdiction etc are discussed in __________ of the Act.
A: Chapter 17
13. Issuance of notice by the holder in case of dishonor is primarily provided in _________.
A: Sec.93
14. Sec.118 of the Act deals with_______.
A: Presumptions
15. A cheque is crossed_________when it bears across its face an addition of the name of a banker,
either with or without the words "not negotiable".
A: Specially[Sec.124]
16. Condonation of delay in making complaint is provided under________.
A: Proviso to Sec.142
17. Compounding of offences is provided under________.
A: Sec.147
18. When the amount is stated differently in words and figures, the amount stated in _________is to be
taken.
A: words[Sec.18]
19. Unless the contrary is proved, holder of negotiable instrument _________presumed to have received
the cheque referred under Sec.138 for the discharge of any debt or liability.
A: Shall be[Sec.139]
20. Signing a document written, read and understood is called________.
A: execution.
1. The Negotiable Instruments Act, 1881 applies to

(a) the whole of India

ADVERTISEMENTS:

(b) the whole of India except the State of Jammu and Kashmir

(c) those states as notified by the Union Government from time to time in the Official Gazette

(d) the whole of India except the State of Jammu and Kashmir and the North- Eastern States.

2. The Negotiable Instruments Act, 1881 came into force on

ADVERTISEMENTS:

(a) 9th December, 1881

(b) 19th December, 1881

(c) 1st March, 1882

(d) none of the above.

ADVERTISEMENTS:

3. The undertaking contained in a promissory note, to pay a certain sum of money is

(a) conditional

(b) unconditional

(c) may be conditional or unconditional depending upon the circumstances

ADVERTISEMENTS:

(d) none of the above.

4. A bill of exchange contains a/an

(a) unconditional undertaking

(b) unconditional order

ADVERTISEMENTS:

(c) conditional undertaking

(d) conditional order.

5. Cheque is a

(a) promissory note

(b) bill of exchange

(c) both (a) and (b) above

(d) None of the above.

6. The term “a cheque in the electronic form” is defined in the Negotiable Instruments Act, 1881 – under

(a) section 6(a)

(b) section 6(l)(a)

(c) explanation 1(a) of section 6

(d) section 6A.

7. The term ‘Negotiable instrument’ is defined in the Negotiable Instruments Act, 1881, under section
(a) 12

(b) 13

(c) 13A

(d) 2(d).

8. The term ‘negotiation’ in section 14 of the Negotiable Instruments Act, 1881 refers to

(a) the transfer of a bill of exchange, promissory note or cheque to any person, so as to constitute the person
the holder thereof

(b) the payment by a bank on a negotiable instrument after due verification of the instrument

(c) the bargaining between the parties to a negotiable instrument

(d) all of the above.

9. If an instrument may be construed either as a promissory note or bill of exchange, it is

(a) a valid instrument

(b) an ambiguous instrument

(c) a returnable instrument

(d) none of the above.

10.If in an instrument the amount undertaken or ordered to be paid is stated differently in figures and in
words

(a)the instrument is void due to uncertainty

(b)the amount stated in figure shall be the amount undertaken or ordered to be paid

(c) the amount stated in words shall be the amount undertaken or ordered to be paid

(d) none of the above.

11. Under section 16 of the Negotiable Instrument Act, ‘indorsement in blank’ of an instrument means

(a) where the indorser does not write anything on the instrument

(b) where the indorser signs his name only on the instrument

(c) where the indorser writes the name of the person who is directed to pay

(d) none of the above.

12. ‘At sight’ under section 21 of the Negotiable Instrument Act, 1881, means

(a) on presentation

(b) on demand

(c) on coming into vision

(d) none of the above.

13. A promissory note or bill of exchange which is not expressed to be payable on demand, at sight or on
presentment is at maturity

(a) on the 30th day after the day on which it is expressed to be payable

(b) on the 3rd day after the day on which it is expressed to be payable

(c) on the 5th day after the day on which it is expressed to be payable

(d) on the 4th day after the day on which it is expressed to be payable.

14. If a minor draws, indorses, deliver or negotiates an instrument, such instrument binds

(a) all parties to the instrument including the minor

(b) only the minor and not other parties to the instrument

(c) all parties to the instrument except the minor

(d) none of the above.

15. In a promissory note, the amount of money payable

(a) must be certain

(b) may be certain or uncertain

(c) is usually uncertain

(d) none of the above.

16. An authority to draw bills of exchange

(a) itself import an authority to indorse

(b) does not itself import an authority to indorse

(c) sometime import an authority to indorse

(d) none of the above.

17. The term ‘legal representative’ in section 29 of the Negotiable Instruments Act, 1881

(a) does not include executors or administrator (Rama v. Pravin, AIR 1926 Mad 389)

(b) includes executors or administrator (K. Subbanna v. K. Subbarayudu, AIR 1926 Mad 390)

(c) includes executors but does not include administrators (P. Nayar v. T. Ramanna, AIR 1929 Mad 389)

(d) includes only administrators but does not include executors (P.K. Pati v. Damodar Sahu, AIR 1953 Ori 179).

18. Can a drawer escape from his liability?

(a) no, a drawer can never escape from his liability

(b) yes, a drawer can limit or exclude his liability by inserting in the bill an express stipulation to that effect

(c) in certain cases although he can escape from his liability but always he cannot so escape

(d) none of the above.

19. In which of the following case the elementary law is laid down that where there is no acceptance, no
cause of action can have arisen to the payee against the drawee

(a) Khandas Narandas v. Dahiabhai, ILR 3 Bom 182 (183)

(b) Venkayya Pantulu v. Sun/a Prakasamma, AIR 1940 Mad 879

(c) Karak Rubber Co. Ltd. v. Burden, (1972) 1 All ER 1210

(d) K.A. Lona v. D.H. Ibrahim, AIR 1981 Ker 816 (DB).

20. A bill is drawn payable to ‘A’ or order. ‘A’ indorses it to ‘B’, the indorsement not containing the words ‘”or
order” or any equivalent words. Can ‘B’ negotiate the instrument?

(a) yes

(b) no

(c) not always

(d) none of the above.

21. Where an indorser of an instrument excludes his liability and afterwards becomes the holder of the
instrument, who are liable to him?

(a) no one is liable to him

(b) all intermediate indorsers are liable to him

(c) only the immediate prior indorser is liable to him

(d) none of the above.

22. Can the legal representative of a deceased person negotiate a promissory note, bill of exchange or
cheque payable to order by delivery only which was indorsed by the deceased but not delivered by him?

(a) yes, the legal representative can negotiate the instrument by delivery only

(b) no, the legal representative can not negotiable an instrument by delivery only. He must re-indorse and
deliver the instrument for negotiating it

(c) an instrument indorsed by a deceased person has no legal validity and is void

(d) none of the above.

23. Can the holder of a negotiable instrument indorsed in blank convert the indorsement into an
indorsement in full?

(a) no, such a conversion is not possible under the Negotiable Instruments Act, 1881 (Section 49)

(b) yes, the holder can, without signing his own name, and by writing above the indorser’s signature a
direction to pay to any other person as indorsee, convert the indorsement in blank into an indorsement in full
(Section 49)

(c) yes, the holder can by signing his own name and by writing above the indorser’s signature a direction to pay
to any other person as indorsee, convert the indorsement in blank to an indorsement in full (Section 49)

(d) none of the above.

24.The indorsement of a negotiable instrument followed by delivery

(a) transfers to the indorsee the property in the bill, provided the indorsement must be an indorsement in full

(b) does not transfer the property in the bill to anyone

(c) transfers to the indorsee the property in the bill

(d) transfers to the holder the property in bill.

25. When presentment for payment is to be made under section 65 of the Act?

(a) Presentment for payment can be made at any reasonable time.

(b) Presentment for payment must be made during the usual hours of business and, if at a banker’s, within
banking hours.

(c) There is no such stipulation on the time for presentment.

(d) none of the above.

26. In determining reasonable time for the purpose of payment of a negotiable instrument

(a) public holidays are included

(b) public holidays are excluded

(c) only the holidays observed by the banks are excluded

(d) none of the above.

27. The question of the reasonableness of the time for presenting a bill of exchange for payment is a

(a) question of law

(b) question of fact

(c) mixed question of law and fact

(d) none of the above.

28. Under section 76(b) of the Negotiable Instruments Act, 1881, the engagement to pay must have been
entered into

(a) at maturity (Mehar v. Hari Gaur, AIR 1935 Lah 666)

(b) after maturity (Sivaram v. Jayaram, AIR 1960 Mad 297 (DB)

(c) prior to maturity (Thakur Din v. Oudh Commercial Bank Ltd., AIR 1999 Oudh 16)

(d) none of the above.

29. A note under section 99 of the Negotiable Instruments Act should contain among other things

(a) place of the notary

(b) charges of notary

(c) both (a) and (b)

(d) none of the above.

30. A notice of protest under section 102 of the Negotiable Instruments Act, 1881

(a) may be given by the notary public who makes the protest

(b) must always be given by the notary public who makes the protest

(c) must be given by the holder

(d) none of the above.

31. Under section 118 of the Negotiable Instruments Act, 1881, it is presumed, until the contrary is proved,
that every transfer of a negotiable instrument was made

(a) after its maturity

(b) before its maturity

(c) at its maturity

(d) none of the above.

32. To whom of the following, payment of the amount due on a promissory note, bill of exchange or cheque
must be made in order to discharge the maker or acceptor

(a) holder of the instrument

(b) indorser of the instrument

(c) indorsee of the instrument

(d) none of the above.

33. The provisions of section 87 of the Negotiable Instruments Act, 1881, are subject to the provisions of

(a) sections 20,48, 68 and 125 of the Act

(b) sections 20, 49, 68 and 122 of the Act

(c) sections 20, 49, 86 and 125 of the Act

(d) sections 20, 49, 66 and 125 of the Act.

34. Under section 118 of the Negotiable Instruments Act, the onus of proving absence of consideration in
the execution of a negotiable instrument is on the

(a) indorser (Zohra Jan v. Rajan Bibi, 28 IC 402)

(b) executant (Zohra Jan v. Rajan Bibi, 28 IC 402)

(c) drawee (R.S. Rajeswara Sethupathi v. Chidambaram Chettiar, AIR 1938 PC 123)

(d) none of the above.

35. Which of the following is not a justified round of dishonouring of cheque by anker?

(a) the cheque is post-dated and presented before the ostensible date

(b) the banker had sufficient funds, but the funds are not properly applicable towards the payment of the
cheque
(c) if the cheque is altered in parts

(d) if the cheque is duly presented.

36. When the acceptor of an instrument is also a drawer, notice of dishonour is

(a) necessary (section 98A)

(b) not necessary [section 98(e)]

(c) not always necessary but under certain circumstances mentioned in section 98A of the Act, it is a must

(d) none of the above.

37. Under section 97, of the Negotiable Instruments Act when the party to whom notice of dishonour is
dispatched is dead, but the party despatching the notice is ignorant of his death, the notice is

(a) sufficient

(b) not sufficient

(c) null and void and has no effect

(d) none of the above.

38. If the words “not negotiable” are used with special crossing in a cheque, the cheque is

(a) not transferable

(b) transferable

(c) negotiable under certain circumstances

(d) none of the above.

39. Crossing of a cheque effects the

(a) negotiability of the cheque

(b) mode of payment on the cheque

(c) both (a) and (b)

(d) none of the above.

40. What is the presumption under section 137 of the Negotiable Instruments Act, 1881?

(a) a negotiable instrument drawn in a foreign country is genuine

(b) the law of any foreign country regarding promissory notes, bills of exchange and cheques is same as that of
India

(c) both (a) and (b)

(d) none of the above.

41. Who among the following cannot cross a cheque?

(a) drawer

(b) holder

(c) banker

(d) foreigner.

42. As per section 147 of the Negotiable Instruments Act, 1881, every offence punishable under the Act are

(a) compoundable

(b) non-compoundable

(c) cognizable

(d) both (b) and (c) above.

43. Under the provisions of section 143 of the Negotiable Instruments Act, 1881, all offences under the Act
are to be tried by

(a) any Judicial Magistrate

(b) Judicial Magistrate of the First Class or by a Metropolitan Magistrate

(c) only a District Judge

(d) none of the above.

44. For what term of imprisonment an offender under section 138 of the Negotiable Instruments Act can be
punished?

(a) for a term which may extend to two years

(b) for a term which may extend to one year

(c) for a term not exceeding three years

(d) none of the above.

45. Dishonour by non-acceptance takes place

(a) when the bill is properly presented for acceptance, except where presentment is excused, but the drawee
makes the default in accepting it

(b) when the Dill is properly presented for acceptance, except where presentment is excused, but the drawee
makes the default in paying it

(c) when the bill is properly presented for payment, except where presentment is excused, but the drawee fails
to accept it

(d) none of the above.

46. The presumption as to the date of a negotiable instrument under section 118 is that, every negotiable
instrument bearing a date was made or drawn

(a) prior to that date

(b) on such date

(c) may be on or prior to that date

(d) none of the above.

47. In the absence of a contract to the contrary, the liability of the maker or drawer of a foreign negotiable
instrument is regulated in all essential matters

(a) by the law of the place where the instrument is made payable (section 134)

(b) by the law of the place where the instrument is indorsed (section 134)

(c) by the law of the place where the instrument is made (section 134)

(d) none of the above.

48. Chapter XVII was inserted into the Negotiable Instruments Act, 1881, by amendment of the Act in the
year

(a) 1888

(b) 1988

(c) 1998

(d) none of the above.

49. Chapter XVII contain sections

(a) 138 to 142

(b) 136 to 142

(c) 112 to 124

(d) none of the above.

50. With effect from which date, the term of imprisonment under section 138 was increased to two years
from one year?

(a) from 6-2-2002

(b) from 6-2-2003

(c) from 1-4-1989

(d) none of the above.

51.Section 138 of the Negotiable Instruments

Act, 1881,……………. mens rea

(a) partially excludes

(b) includes

(c) sometime includes

(d) none of the above.

52.When a cheque has become invalid because of the expiry of the stipulated period, can it be re-validated
by the drawer by alteration of dates?

(a) yes, the drawer can re-validate the cheque by alteration of dates

(b) no, the drawer cannot re-validate it by so alteration of dates

(c) although the drawer cannot revalidate the cheque, but the drawee can at his discretion revaliate it

(d) none of the above.

53. For the purpose of attracting the provisions of section 138 of the Negotiable InstrumentsAct, 1881, a
cheque has to be presented to the bank

(a) within a period of six months

(b) within a period of six months from the date on which it is drawn or within the period of its validity,
whichever is earlier

(c) within a period of 15 days from the date on which it is drawn

(d) none of the above.

54.Cognizance of an offence under section 138 can be taken by a court only on a/an

(a) police report (section 142)

(b) complaint (section 142)

(c) application to the District Judge (section

(d) none of the above.

55. Who should make a complaint to a court for the purpose of taking cognizance of an offence under
section 138?

(a) the payer or as the case may be, the holder in due course of the cheque

(b) any person who is effected can make a complaint

(c) the payee with the written permission of the drawee

(d) none of the above.

56. A complaint against an offence under section 138 of the Negotiable Instrument Act, 1881

(a) must be in writing (section 142) –

(b) may be oral or in writing (section 142)

(c) must be in writing containing a declaration by the drawee that he consents to such filing of the complaint
(section 142)

(d) none of the above.

57. In the trial of an offence under section 138 of the Negotiable Instruments Act, the provisions of sections
262 to 265 of the Code of Criminal Procedure

(a) shall apply (section 143)

(b) shall not apply (section 143)

(c) sometimes shall apply (section 143)

(d) none of the above.

58. Under section 143 of the Negotiable Instruments Act, an endeavour shall be made to conclude the trial
within…………………….. months from the date of filing of the complaint.

(a) 9

(b) 3
(c) 6

(d) 12.

59. Can a ‘notice in writing’ envisaged in section 138(b) of the Negotiable Instruments Act, 1881, be sent by
telegraph?

(a) no (V. Raju v. P. Subbarama Naidu, AIR 1931 Mad 301)

(b) yes [M.V. Muthuramlingam v. D. Narayanswamy, (1995) 3 Comp Cas 77 Mad]

(c) yes [A.B. Steels v. Krishna Finance, (1996) 86 Comp Cas 295 (Mad)]

(d) none of the above.

60. The provision of section 147 of the Negotiable Instruments Act, 1881, that every offence punishable
under this Act shall be compoundable was inserted by the

(a) amending Act of 1988

(b) amending Act of 1980

(c) amending Act of 2002

(d) none of the above.

61. The liability under section 138 of the Negotiable Instruments Act, 1881, is

(a) strict liability

(b) vicarious liability

(c) both (a) and (b)

(d) none of the above.

62. A Magistrate issuing a summons to an accused or a witness can send it

(a) by speed post

(b) by courier services

(c) by a courier services as are approved by a court of session

(d) both (a) and (c).

63. Under the Limitation Act, 1963 the period of limitation for filing a suit by the payee against the drawer of
a bill of exchange which has been dishonoured by non- acceptance is

(a) 3 years from the date of the refusal to accept

(b) 2 years from the date of the refusal to accept

(c) 3 years from the date of the signing by the drawer

(d) 3 years from the date of presentment.

64. A post-dated cheque remaines only a bill of exchange till the date on its face and only from that date it
becomes a cheque being payable on demand. The statement is-

(a) false [Anil Kumar Sawhney v. Gidshan Rai, (1993) 4 SCC 424]

(b) true [Anil Kumar Sawhneu v. Gidshan Rai, (1993) 4 SCC 424]

(c) true [Jogy David v. K.K. Babu, (1998) 94 CompCas 711 (Ker)]

(d) true [Punna Devi v. John Inpex Pvt. Ltd., (1996) 2 Bank CLR 482],

65. As per the provisions of section 93, when a cheque is dishoroured by non-acceptance or non-payment
the holder

(a) may or may not give notice to the parties whom the holder seeks to make liable thereon

(b) must give notice to the parties whom the holder seeks to make liable

(c) must give notice to the parties whom the holder seeks to make liable, but after noting

(d) must not give any notice to anyone.

66. In which of the following case the Supreme Court held that “the persons who are sought to be made
vicariously liable for a criminal offence under section 141 should be, at the time the offfence was
committed, was in charge of, and was responsible to the company for the conduct of the business of the
company. Every person connected with the company shall not fall within the ambit of the provision”?

(a) National Small Industries Corporation Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330

(b) State of Bihar v. Kalyanpur Cement Ltd., (2010) 3 SCC 274

(b) both (a) and (b)

(d) none of the above.

67. The provisions regarding summary procedure relating to suits upon bills of exchange, huttdies and
promissory notes are laid down in

(a) Order 37 of CPC

(b) Order 38 of CPC

(c) Order 39 of CPC

(d) none of the above.

68. A protest must contain

(a) the name of the person for whom the instrument has been protested

(b) the name of the person against whom the instrument has been protested

(c) the instrument itself or its literal transcript

(d) all of the above.

69. A protest is made by

(a) the drawer

(b) the indorser

(c) a notary

(d) none of the above.

70. Where a cheque is crossed generally the banker on whom it is drawn

(a) shall not pay it otherwise than to a banker

(b) shall not pay it otherwise than to the holder

(c) shall not pay it to a banker